Can Anyone Make A 'Netflix for Baby Clothes' Work?

Collaborative consumption business models meet their test in the hyper-competitive baby clothing sector.

Sharing isn’t a simple way to earn a living, and barter is a tricky business, but one cute little market—baby clothes—turns out to to be a tough proving ground for collaborative consumption business models. Now a new company, GoodKarma, is entering the tot market with high hopes.

On its face, it makes economic sense for moms to swap, share and reuse kids’ clothes. Babies outgrow outfits faster than they can ruin them, leaving parents with perfectly good, or at least good enough, animal pajamas and spaceship sweatshirts in need of a new home. Babies go through seven sizes by the time they’re two years old. It costs an estimated $27,000 to outfit the average American before they stop growing around 17 years of age, so there’s certainly money to be made helping families cut clothing costs.

GoodKarma is a subscription service to help parents do just that by sharing used clothes. Starting at around $30 a month, moms can get seven outfits for their quick-growing offspring. They keep them until the kiddie hits a growth spurt or the season changes and it’s time for a new outfit. Then they pack up the whole bunch, new stains and all, and stuff them back in a prepaid mailer to founder Sharon Schneider. Wash, rinse, repeat—literally.

But building this kind of business isn’t as easy as it appears. Last summer, Plum Baby Gear billed itself as a "Netflix for baby clothes" and garnered a waiting list for customers, but by last month, Plum's founders had shut down after determining they couldn't scale up profitably. Parents wanted too many style options, and sent the clothes back for replacement too often for costs and inventory to stay low.

Compare that kind of burden on a sharing subscription company to the old faithful of collaborative consumption in the baby clothes-sharing sector, thredUP, which uses a swapping model and doesn't need to touch the clothes itself. ThredUP signs up hundreds of new moms a week and has facilitated more than two million items traded, according to company figures. Parents buy a box stuffed with clothes for $9 plus shipping straight from another parent. ThredUP keeps the a chunk of $9 kicking back up to $5 to the sender depending on quality ratings from the receiver—it was originally a $5 fee all to thredUP. If customers want the right to get more than a set amount of clothes, they need to give some up for $9 or get locked out of the loop.

The secret to a swapping site is liquidity, thredUP founder James Reinhart told me on the occasion of his millionth item swapped last June. Success means a large scale and careful management customers to ensure the right proportion of givers and getters.

Fast as thredUP's growth is though, many parents don't like to find the clothes too much like hand-me-downs, even if the price comes out to as little as $1 a piece; in response, thredUP has recently launched a "concierge" service that lets customers send in clothes to the company to sell by the piece, for cash or credits used for swapping by the box.

Plum Baby Gear attempted to attract the kind of customer who wanted a little more choice than thredUP offered, but it failed in part because its rental customers were more interested in shopping for discounted clothing than swapping hand-me-downs. GoodKarma aims to hit that sweet spot. Schneider remains optimistic her company will avoid Plum’s fate, especially after winning the Common Pitch NY competition earlier this month.

Why might her company work in a sector where swapping has succeeded and Plum's subscription model failed? Plum offered new clothes and let subscribers choose styles from a limited pool of options, putting stress on the company, while GoodKarma takes the opposite tack, buying used clothes in bulk and letting parents say what they don’t want—clothes with “daddy” on them aren’t a hot choice for single moms, for instance.

“You can tell us my daughter is a girly girl, or no monkeys, and GoodKarma will send you clothes that fit your requests,” Schneider says. There’s a notes section and she reads each one. “We’re small enough that I still call almost every subscriber and say, did you like it?”

That doesn’t bode well for scale. For now, the company has just a few dozen customers since launching in December with a Groupon offer to Milwaukee residents. Getting the space ship sweatshirts to the future scientists will be the hardest problem, but some sorting will earn Schneider extra income—clothes are divided by brand into three categories, “basic,” “better,” and “boutique” with prices scaling accordingly.

That’s why Schneider expects to draw a premium over the lower cost peer-to-peer barter option, while still remaining cheaper and less wasteful for a consumer than purchases straight from Macy’s or even Wal-Mart. Waste reduction, after all, is a major motivation for the kind of customers who patronize a collaborative consumption business.

GoodKarma is also trying to be as socially responsible as possible. Their bulk clothing buys come from school fundraisers and clothing drives. Families get a tax deduction for donating to the school, and then GoodKarma pays the school for the clothing.

If they grow in size, a fundraiser like could earn a couple thousand dollars for a school: A basic baby tee would fetch $1, and a designer brand could get up to $15 per piece. That’s better than a bake sale.

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